Motorola Inc. is acquiring MeshNetworks Inc., developer of a technology that makes it easy to set up and expand wireless networks, in a deal expected to help the world’s No. 2 cell phone maker win more government business.
Terms were not disclosed for the transaction, announced Tuesday.
The technology used by MeshNetworks and some other firms extends the concept of wireless hotspots from individual locations to networks covering entire areas where data, video, location and Voice over Internet Protocol (VoIP) can be shared. Because traditional infrastructure is not needed, industry experts say the technology is particularly well-suited to military and emergency needs.
Wireless analyst Albert Lin called the investment “an extremely good move” by Schaumburg, Ill.-based Motorola, which makes wireless infrastructure equipment as well as cell phones, noting that its government systems business already is one of its most profitable.
“One of the biggest customers for wireless networking equipment over the next decade or so will be the Department of Defense,” said Lin, of American Technology Research in San Francisco. “There is no greater profit potential for Motorola than making a sale to the government — usually they’re well-funded, long in duration and highly profitable.”
Motorola’s commercial, government and industrial solutions division had $3.3 billion in sales through nine months of 2004, barely a quarter of the $11.9 billion pulled in by the cell-phone unit. But it was more profitable for its size, reaping $546 million in operating earnings, or nearly half that of the much bigger division.
“This acquisition will provide Motorola with technologies that will have a significant benefit for customers across all of our businesses,” said Greg Brown, president of the commercial and government unit. “The acquisition also represents another step in Motorola’s commitment to deliver seamless mobility to all of our customers.”
Founded in 2000 in Maitland, Fla., Mesh has about 70 employees. The privately held company contracts with government, law enforcement and civil defense agencies to create mobile or mesh networks, and also develops broadband radio and position-location technologies.
The company had talked about going public next year but has not made a profit, according to Lin, who estimated its annual sales at roughly $20 million.
Forrester Research analyst Charles Golvin said that while Mesh has yet to fully prove itself on the market, the purchase is “another arrow in their (Motorola’s) quiver for finding ways to enable connectivity on the go.”
Mesh technology, also known as ad hoc networking, was developed in the military and has grown popular among emergency responders.
In a mesh network, a mobile device doubles as a relay point that can transmit a signal between other devices. For example, a firefighter too deep in a building to radio command officials can communicate via a nearby firefighter, whose radio could zap a conversation or data to the next closest radio, and so on until it reaches the intended target.
A mesh setup also requires less power and deprives attackers of a centralized target to take down.
Motorola and MeshNetworks already had existing ties, with Motorola as both a customer and an investor through its venture capital arm.